As we previously reported, the IRS has updated its guidance with helpful examples concerning program-related investments for private foundations. In its recently issued Notice 2015-62, the IRS provides further assurance that private foundations may take the accomplishment of charitable purposes into account in investing decisions, in addition to financial return.
Among other restrictions, private foundations are subject to Section 4944 of the Internal Revenue Code. Section 4944 imposes excise taxes on a private foundation that makes a “jeopardizing investment,” as well as on the foundation’s directors, officers, and management who knowingly participate in the making of the investment. Jeopardizing investments do not include “program-related investments.” These are investments made without any significant purpose of financial return. Notice 2015-62 does not address program-related investments; rather, it addresses investments having a charitable as well as financial purpose.